Meaning of a ‘Transfer of a Business’

The European Court of Justice, ‘ECJ’, has ruled that a ‘transfer of a business’ under the Acquired Rights Directive (2001/23/EC) covers occasions where a majority shareholder takes over its subsidiary’s activities after having been wound up. In turn, where the transferred entity retains its identity after the transfer, illustrated by the activity continuing or resuming, this is held to account for a TUPE transfer.

This was held in the case Ferreira da Silva e Brito and others v Estado Portuges. In 1993, the charter airline company, Air Atlantis (AIA), was wound up, with nearly 100 employees being dismissed as part of a collective redundancy process. TAP, its main shareholder, began to operate some of the routes which AIA had contracted to provide, using AIA’s offices, equipment, planes and some of their former employees, who were assigned to roles which they had previously undertaken for AIA.

The claimants brought proceedings against TAP claiming that the collective redundancies were unlawful, and that their contracts of employment had been transferred to TAP under the Acquired Rights Directive.

The matter eventually reached the ECJ, which held that there had been a transfer of a business within the meaning of the Directive.

The law and practice referred to in this article has been paraphrased or summarised. It might not be up-to-date with changes in the law and we do not guarantee the accuracy of any information provided at the time of reading. It should not be construed or relied upon as legal advice in relation to a specific set of circumstances.

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